Two new hotels announced for downtown Salt Lake City

We are thrilled with the location of this project, with its ease of access to the city’s improved public transportation and other Salt Lake entertainment, business function and retail amenities.—Cameron Gunter

SALT LAKE CITY — The downtown landscape will soon be adding two new hotels, but elected officials and business leaders have differing opinions on what the new projects mean for the future of a convention center property.

Maryland-based Alex. Brown Realty Inc., in conjunction with PEG Development and Blue Diamond Capital, both based in Utah County, announced Tuesday a joint venture to develop two hotels, a structured parking garage and mixed-use retail on a 3.26-acre site on the southwest corner of 100 South and 300 West, adjacent to EnergySolutions Arena. The site is located in close proximity to the Salt Palace Convention Center, Temple Square, City Creek Center and The Gateway.

Construction of the project will occur in two phases, with the first phase consisting of a 159-room, extended-stay Hyatt House hotel and a 349-space parking garage.

The ownership group also announced it has secured a $19.4 million construction loan from U.S. Bank for phase one of the development.

Prior to construction, the joint venture group will complete an environmental remediation of the site in accordance with plans approved by the Utah Department of Environmental Quality and the U.S Environmental Protection Agency.

Later on, phase two will consist of a 175-room, select-service Courtyard by Marriott hotel. Both properties will feature ground-level retail, and the parking garage will accommodate hotel guests, as well as event parking for EnergySolutions Arena and the convention center.

The Hyatt House hotel is expected to open in fall 2014, while the Courtyard by Marriott property is scheduled for occupancy in spring 2015. Based on data provided by PKF Consultants, the supply of hotel rooms in the Salt Lake metro area has increased by 2.3 percent since 2009, while demand increased by 6.3 percent.

“We see a real opportunity in the market for new hotel rooms,” said Cameron Gunter, PEG’s founder and managing member. “We are thrilled with the location of this project, with its ease of access to the city’s improved public transportation and other Salt Lake entertainment, business function and retail amenities.”

The new properties will join a list of more than 30 hotels already located in downtown. During the 2013 Legislature, a bill that would have provided tax credits for the development of a “headquarter hotel” near the Salt Palace Convention Center was narrowly defeated in the House.

Sponsored by Rep. Brad Wilson, R-Kaysville, SB267 would have implemented a 20-year, post-performance property tax for the developers of the hotel, similar to the rebate given to companies such as Adobe that have relocated and invested in the state.

But many lawmakers expressed concerns about the bill, particularly the impact on existing downtown hotels, saying it would potentially give developers an unfair advantage over existing properties that received no government incentives. Other critics argued that building a major new property should only occur if the project is undertaken by private investors with no public or government involvement.

Meanwhile, supporters say a 1,000-room convention center hotel would put Utah’s capital city on equal footing with other similarly sized metro areas such as Denver, Nashville, Phoenix or San Antonio.

Salt Lake County Mayor Ben McAdams said planners for nearly 30 conventions that chose not to come to Utah cited the absence of a central headquarter hotel as the main reason.

Even if a fraction of those lost conventions had chosen Salt Lake City, then the economic benefits would have been “incredible,” he added.

“If we are able to get a headquarter hotel, then we’ll see spillover benefits to other hotels in the area,” McAdams explained. “The development of the new properties just shows that there is energy and economic growth in that (area of downtown).”

Despite the addition of the extended-stay hotels, the development of a convention hotel would be mutually beneficial to the market segments served by each type of property.

Jason Mathis, executive director of the Downtown Alliance, also voiced support for the new project, calling it “the evolution” of that area of downtown. He added that while the new project is good for the community “from a development perspective,” the new hotels would not attract many new travelers to Salt Lake City.

“Nobody should confuse these hotels with a full-service convention hotel that will actually bring new, larger conventions and convention delegates to our community,” Mathis said. “Limited-service hotels compete on rate for existing business, whereas a large convention center hotel next to the Salt Palace will actually bring new business and ultimately raise the daily rates for every other property.”

Rep. Jacob Anderegg, R-Orem, who voted against the bill, said the new hotels likely will have a negative impact on the future of a headquarter hotel property.

“It takes away the emphasis of having a new convention center hotel built in Salt Lake County,” Anderegg said. “If you bring in new hotels, that hurts bringing in a convention center because you’re creating more supply than demand.”

The assessment of convention hotel supporters who claim, “If you build it, they will come,” he said, is overstated.

Anderegg conceded that a convention hotel could potentially be a “boon for the state,” but the proposal put forth in the Legislature gave away “too much of the bank.” Offering tax-free operation for two decades is too much for taxpayers to burden, he said.

Rep. Brian Greene, R-Pleasant Grove, who strongly opposed SB267, said he was glad to see that the new project was a private joint venture funded through conventional financing methods and not with the investment of public funds or tax incentives.

“Privately owned projects should not be the recipient of taxpayers' funds,” Greene said.